HMRC targets Etsy, eBay, Amazon, Facebook & Gumtree sellers

TKPeters

http://www.telegraph.co.uk/finance/personalfinance/household-bills/11632478/HMRC-targets-Etsy-eBay-and-Gumtree-sellers-but-when-is-your-hobby-taxable.html


HMRC targets Etsy, eBay, Amazon, Facebook and Gumtree sellers – but when is your hobby taxable?

Websites are being forced to hand over customer account data as the taxman targets 14,000 suspected evaders

Thousands of online sellers who use websites such as eBay, Etsy, Amazon, Facebook and Gumtree are the focus of fresh attempts by HM Revenue & Customs to crack down on tax evasion, Telegraph Money can disclose.

Such websites are being forced to hand over customer account details, including their selling activity, as part of the Revenue’s legal powers that were extended last year.

This type of information gathering has enabled the taxman to target 14,000 individuals it suspects of failing to declare profits on their self-assessment tax returns, the Revenue confirmed.

Using extensive new powers introduced last year, HMRC can download people’s account information and even force sellers to pay tax that is disputed or subject to an inquiry.

The fresh crackdown follows a campaign that ended in 2012 to warn sellers that tax might be due on their hobby as long as their activity is classed as “trade”. We explain which types of sellers HMRC says must pay tax below.

The Revenue raised more than £9m in tax as a result of the earlier campaign, with one eBayer who turned over an undeclared £1.4m in six years handed a two year prison sentence. John Woolfenden failed to pay almost £300,000 in tax on his DVD and games business, in a high-profile case designed to put off would-be evaders.

Since that campaign was wound down, the taxman is now on the lookout for a new evader to prosecute as a deterrent to others.

The Revenue said it was investigating suspected avoidance cases where “risks have been identified” or where traders need to be “educated” about their tax liability.

A spokesman said: “Where people choose not to set the record straight, we conduct follow-up work. This includes investigations and prosecutions.”

People who register their account as a “business seller” on websites such as eBay or Amazon are among the likely targets.

The nine ‘badges of trade’

1. Is your primary motive to earn a profit? If HMRC thinks you intended to make money, rather than selling items for fun, your selling activity is considered to be a business.
2. The number of transactions matter. If you repeat very similar transactions in a short period of time, this might be considered a badge of trade.
3. What type and quantity of goods are you selling? Are you buying so many that you profit from an economy of scale? Did they yield an income while they were in your possession? To demonstrate that your selling activity is a hobby, you may need to prove the goods gave you “pride of possession”, for example, a picture for personal enjoyment.
4. If your online transactions are similar to an existing type of business, such as a clothing retailer or specialist collectables seller, this may be used by HMRC as evidence that you are trading.
5. If you modify items before selling them, again this is a badge of trade. Ask yourself: do you repair, alter or improve items to make them more saleable and, therefore, achieve a greater profit?
6. How did you carry out the sale? If you sold an item in the same way as a shop or auction house – where customers agree to buy something at a fixed price – you could be classed as a business. This is known as an “undisputed trade”.
7. If you borrowed money to buy an item, especially if this loan could be repaid only by selling the items again, this is evidence of trade.
8. The period of time between when you bought the item and sold it again will be looked at by HMRC. Any assets that are the subject of trade will normally, but not always, be sold quickly. This suggests that you only bought an item with the intention of selling it. By contrast, an asset that you bought with the intention of owning it, but then decided to sell after a period of time is much less likely to be suspect.
9. How did you acquire the item? If you received something as a gift, or an inheritance, you’re far less likely to be seen to be running a business when you go on to sell.

RFW

We all know there must be a lot of them. Sounds like they're after catching a few big ones so the smaller ones will fall in line.
I'd imagine the time to investigate smaller avoiders will cost more than they're likely to ever get back off them. There'll be loads of sellers on Etsy making stuff who think they're not a business, I doubt there are many that get into high profits that they were keeping back a lot of tax.

Widelats

Oh my..... you know something, everyone should stop paying any tax at all, for the items sold the tax was already paid on that item when bought new it should not be paid a second, third, fourth time etc etc, that would be like taxing charity shops.

Only 9 million in tax, when the real tax avoiders are the big businesses avoiding billions each.

If nobody pays tax, then theres nothing they can do about it, they can not lock eveyone up - that would cost a fortune in tax money.

RFW

Widelats wrote: »

Oh my..... you know something, everyone should stop paying any tax at all, for the items sold the tax was already paid on that item when bought new it should not be paid a second, third, fourth time etc etc, that would be like taxing charity shops.

It's not all second hand items and tax doesn't really work like that.
A lot of the items I sell have been sold 2 or 3 times before but they are new (they've at least been manufacturer to wholesaler to me) and I still expect to pay tax and VAT.

The whole global tax system needs looking at. It's way too complicated and easy to evade/avoid if you're big enough or small enough. It's all us poor s*ds in the middle that get stung.

soolin

Widelats wrote: »

Oh my..... you know something, everyone should stop paying any tax at all, for the items sold the tax was already paid on that item when bought new it should not be paid a second, third, fourth time etc etc, that would be like taxing charity shops.

Only 9 million in tax, when the real tax avoiders are the big businesses avoiding billions each.

If nobody pays tax, then theres nothing they can do about it, they can not lock eveyone up - that would cost a fortune in tax money.

I'm not sure your views would go down well with the elderly or people on benefits who would no longer have any money to call on. Nor people who rely on an NHS service or the police or any other government body.

Going back to the matter in hand, most of the people I am aware of that got 'caught' were fairly small time sellers, but virtually all of them were caught by DWP first and not HMRC.

Widelats

RFW wrote: »

It's not all second hand items and tax doesn't really work like that.
A lot of the items I sell have been sold 2 or 3 times before but they are new (they've at least been manufacturer to wholesaler to me) and I still expect to pay tax and VAT.

The whole global tax system needs looking at. It's way too complicated and easy to evade/avoid if you're big enough or small enough. It's all us poor s*ds in the middle that get stung.

The ministers have got to pay for their luxury houses and expenses somehow....

chickendipperbabe

I know its not right and I'll probably get a kicking for saying this but I don't see the harm in someone working and selling on ebay on the side or someone on meager benefits, those who can't (not wont) work selling to supplement their income.

As said above and even in pretty much every comment I read on the Daily Mail article surprisingly, HMRC should go after companies and individuals abusing the tax system on an industrial scale, those who avoid paying millions and billions. Its quite sad and pathetic really, another attack on the poor but someone on the bones of their back side will tend to roll over easier and be easier pickings for HMRC.

Running_On_Empty

Catching someone whose turnover was 1.4 million and who defrauded the honest ones amongst us out of 300k is hardly targeting the poor, is it? As an honest taxpayer i am pleased that all and every tax evader, big and small, is pursued.

RFW

It's not that surprising that this story comes out the day after HMRC reveal that they waive £100 surcharge on late self assessment filing, pretty much, if someone asks them to. They haven't got the resources to investigate. It's all cost/reward. My guess would be that they may well have a list of 14,000 people but chances are they won't invest more than a few hundred of them.

sequence

RFW wrote: »

It's not that surprising that this story comes out the day after HMRC reveal that they waive £100 surcharge on late self assessment filing, pretty much, if someone asks them to. They haven't got the resources to investigate. It's all cost/reward. My guess would be that they may well have a list of 14,000 people but chances are they won't invest more than a few hundred of them.

Indeed. Catch one or two big ones, harp about the prison sentence and the some of the rest will fall in line. Standard practice for them.

19lottie82

Widelats wrote: »

Oh my..... you know something, everyone should stop paying any tax at all, for the items sold the tax was already paid on that item when bought new it should not be paid a second, third, fourth time etc etc, that would be like taxing charity shops.

Only 9 million in tax, when the real tax avoiders are the big businesses avoiding billions each.

If nobody pays tax, then theres nothing they can do about it, they can not lock eveyone up - that would cost a fortune in tax money.

Really? You obviously have no idea how the economy works.
Yes the big companies avoiding tax are a huge problem, but that doesn't mean people using eBay as a business, shouldn't have to pay tax. It's pretty much the same as having a job, would it be OK for people not to pay tax then?

Not declaring your taxable income is as bad as benefit fraud IMO.

PS I have a full time job, which I pay tax in, and I'm also a (small) eBay business seller, and I pay my tax every year.